An internal audit is best thought of as an examination of the financial statements and records of a business or organisation, by its own people. They are called internal auditors and usually appointed by management. Their responsibilities and the scope of their work is determined by an audit committee.
Because they are internal, these audits are rarely compulsory. They may be carried out regularly and will involve a review of non-financial activities as well.
These are independent critical examinations of the financial statements and records of a business or organisation. These audits are obligatory and must be carried out by a third-party auditor like Brown Assurance Services.
As independent external auditors, our team aims to conduct an audit in order to provide an unbiased opinion on the financial statements and records of the company.
The main responsibility of external auditor is to carry out the statutory audit of the final accounts, and give an unbiased opinion on whether they provide a true and fair reflection of the actual financial position of the entity.
What Do They Have in Common?
Both audits follow the same fundamental process, and require the auditor to have a strong grasp on the principles of accounting. The goal of all audits is to catch errors and uncover possible fraud. It is the common goal of both types of audits to inspect the financial statements of the company, which is the only real way to know if the numbers match the claim the company is making.
How Are They Different?
- Internal audits are a choice, external audits are obligated by law.
- External audits are carried out about once a year after financial records are completed for the year.
- Internal audits are an excellent way to monitor processes across multiple departments in the business. An external audit, however, gives your business records credibility and transparency.
- The scope of an internal audit is completely in the hands of management. An external audit is shaped by regulations.
- An internal audit involves the checking of almost all the financial statements and records; while external audit may be carried out through test checking or sample checking.
- Internal audit reports are submitted to the management of the company or organisation. External audits go straight to shareholders or regulators.
- Internal audits are typically carried out by in-house auditing teams. External audits are carried out by specialist independent auditors.
- The regulations have very specific requirements about auditor appointments.
- External auditor fee is fixed by shareholders of the company, rather than management.
External Audit and Accounting Services
While both are audits, Internal and External audits are carried out with very different intentions. Well managed organisations usually do both. A competent internal audit team keeps an eye on various processes, while a specialised external audit team will work with the business once a year to comb through the financial records to make sure the business hasn’t made any errors.
Contact us today to learn how we can help you conduct smooth, timely audits.